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Markets test support

By Colin Twiggs
July 18th, 2011 4:00 a.m. ET (6:00 p.m. AET)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.


Markets are mixed, with many retracing to test medium-term support while selling pressure is rising. Failure of support would re-visit primary support at early June lows. From a fundamental perspective, we appear to be heading for a period of low/no growth as consumers hold off discretionary spending until the sovereign debt crisis, austerity, and inflation worries in Asia, are resolved. We now have to wait for technical signals from the market to confirm/refute this.

Global Index

The Dow Jones Global Index is testing medium-term support at 258. Declining 21-day Twiggs Money Flow indicates short-term selling pressure, but respect of the zero line would be a bullish sign. Reversal below the band of support at 250, however, would signal a primary down-trend.

Dow Jones Global Index

USA

Dow Jones Industrial Average

Dow Industrials retraced to test support at 12400. Respect of zero on 21-day Twiggs Money Flow would signal buying pressure, while reversal below zero would signal a decline to primary support at 11900.

Dow Jones Industrial Average

* Target calculation: 12800 + ( 12800 - 11900 ) = 13700

S&P 500

The S&P 500 displays a strong red candle on the weekly chart. Failure of support at 1300 would test primary support at 1250. The sharp fall on 13-week Twiggs Money Flow continues to warn of a reversal.

Standard & Poors 500 chart

* Target calculation: 1350 + ( 1350 - 1250 ) = 1450 or 1250 - ( 1350 - 1250 ) = 1150

Transport

Bellwether transport stock Fedex respected resistance between $99 and $100, and is retracing to test primary support at $85. Both Fedex and UPS have consolidated for the last six months in a broad range, reflecting stagnant activity levels.

Dow Transport Index

Technology

The Nasdaq 100 is testing support at 2300. Failure would test primary support at 2200. Bearish divergence on 21-day Twiggs Money Flow warns of selling pressure.

Nasdaq 100

* Target calculation: 2200 - ( 2400 - 2200 ) = 2000 or 2400 + ( 2400 - 2200 ) = 2600

Canada: TSX

The TSX Composite Index continues to signal selling pressure, with 21-day Twiggs Money Flow retreating below zero. Reversal below 13100 would indicate another test of primary support at 12750.

TSX Composite

* Target calculation: 12750 - ( 13500 - 12750 ) = 12000

United Kingdom

The FTSE 100 reflects selling pressure, with a strong red candle on the weekly chart and declining 13-week Twiggs Money Flow. Breach of support at 5650 would warn of a primary down-trend. Recovery above 6100 is unlikely, but would offer a target of 6500*.

FTSE 100 Daily

* Target calculation: 6100 + ( 6100 - 5700 ) = 6500 or 5600 - ( 6100 - 5600 ) = 5100

Germany

The DAX displays more buying pressure, with a long tail on the latest weekly candle at resistance of 7500, but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Failure of support at 7000 would signal a primary down-trend, while breakout above 7600 would offer a target of 8000*.

German DAX

* Target calculation: 7500 + ( 7500 - 7000 ) = 8000

France

The CAC-40 continues to warn of a reversal, with 13-week Twiggs Money Flow falling sharply below zero. Breach of support at 3700 would confirm the signal.

France CAC-40

* Target calculation: 3700 - ( 4100 - 3700 ) = 3300

India

The Sensex displays strong resistance at 19000 on the weekly chart. Respect of the zero line by 13-week Twiggs Money Flow continues to warn of strong selling pressure. Expect another test of primary support at 17500.

Sensex India

Singapore

The Straits Times Index is consolidating in a small pennant, indicating continuation of the down-trend. Respect of zero by 21-day Momentum strengthens the signal. Expect another test of primary support at 3000.

Singapore

Japan

The Nikkei 225 is testing short-term resistance at 10000 Monday. Rising 21-day Twiggs Money Flow indicates buying pressure. Recovery above 10000 would confirm an advance to 10700*.

Japan

* Target calculation: 10000 + ( 10000 - 9300 ) = 10700

South Korea

The Seoul Composite Index also displays buying pressure on 21-day Twiggs Money Flow. Breakout above 2200 would signal an advance to 2400*. Reversal below 2100 is unlikely, but would re-test primary support at 2000.

South Korea

* Target calculation: 2200 + ( 2200 - 2000 ) = 2400

Taiwan

The Dow Jones Taiwan Index found support at 200 and is likely to re-test the declining trendline. Bullish divergence on 21-day Twiggs Money Flow indicates short-term buying pressure. Primary support remains at 196.

Taiwan Index

* Target calculation: 220 + ( 220 - 195 ) = 245

China

The Shanghai Composite Index is in a long-term consolidation around 2700. Respect of the zero line by 13-week Twiggs Money Flow suggests another test of 3000. Reversal below 2700 is unlikely, but would test support at 2400.

Shanghai Composite Index

* Target calculations: 2700 - ( 3000 - 2700 ) = 2400

The Hang Seng Index gapped below the former primary support level at 22200, signaling a primary down-trend. Consolidation in a small pennant indicates continuation of the decline; breakout below 21500 would confirm the target of 20000*. Twiggs Money Flow below zero warns of selling pressure.

Hang Seng Index Hongkong

* Target calculation: 22200 - ( 24400 - 22200 ) = 20000

Brazil: Bovespa

The Bovespa Index is headed for a test of its May low at 58000*. Reversal of 13-week Twiggs Money Flow below zero warns of strong selling pressure.

Brazil Bovespa

* Target calculation: 61000 - ( 64000 - 61000 ) = 58000

South Africa: JSE

The JSE Overall Index is stronger, with rising 21-day Twiggs Money Flow indicating a test of 33000. Bearish influence of global markets, however, is likely to keep the index range-bound for the present.

JSE Overall Index

* Target calculation: 33000 + ( 33000 - 30000 ) = 36000

New Zealand: NZX

The NZ50 breached medium-term support at 3420, indicating a decline to primary support at 3300. The sharp fall on 13-week Twiggs Money Flow continues to warn of a primary reversal.

NZX 50 Index

* Target calculation: 3425 + ( 3425 - 3300 ) = 3550

Australia: ASX

The All Ordinaries retreated below the former primary support level of 4600, warning of a down-trend. Failure of support at 4500 would confirm. A slight rise on 21-day Twiggs Money Flow indicates short-term buying support, but the big picture is bearish.

ASX All Ordinaries

* Target calculation: 4600 - ( 5000 - 4600 ) = 4200

The ASX 200 similarly broke support at 4500. Failure of 4450 would confirm the primary down-trend — as would 13-week Money Flow retreating below zero.

ASX 200

* Target calculation: 4500 - ( 5000 - 4500 ) = 4000



We are all in the same boat in a stormy sea,
and we owe each other a terrible loyalty.

~ G. K. Chesterton

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